Chapter 3

Question 1

What are the four stages of the entrepreneurial process ?

Answer 1

1. Identification and evaluation of an opportunity
2. Develop a business plan
3. Determine the resources required
4. Management of the business

Question 2

Where do ideas come from (3)

Answer 2

Occupation
Hobbies
Personal experience (consumer habits and demands from past experiences)

Question 3

How to find an idea (5)

Answer 3

Observations (potential customers)
Existing products and services (improve these offerings)
Deliberate searches
Focus groups
Brainstorming (allows creativity)

Question 4

Which non quantitative factors determine if a business idea align with a persons goals and expectation?

Answer 4

personal goals regarding income
content/working conditions
lifestyles
capabilities (entrepreneurial skills, good health and management/finance/marketing/administration)
experience
opportunity assessment

Question 5

3 ways to break into the market

Answer 5

1. offer a new product (unmet needs)
2. offer an existing product to a new industry or market
3. offer a product similar to those existing (competition in the market)

Question 6

What is a competitive advantage?

Answer 6

Competitive advantage exists when a firm has a product or service that viewed as better than those of its competitors.

Question 7

which industries are conductive to small business success ?

Answer 7

• businesses in which the owner’s personal attention is needed in daily operations
• businesses in which owner’s contact with employee is essential for motivation and quality control
• demand in the market is too small for large firm to produce
• industries requiring flexibility
• businesses that need intensive labor and less capital
• industries that receive government assistance

Question 8

which are industries that grows rapidly in the future ?

Answer 8

health care
services for small businesses
mobile industries
services that appeal to parents
green products and services

Question 9

What are aspects of a business?

Answer 9

natural advantages: flexibility, innovation, customer service and product quality

competitive advantages: price, selection or location

Question 10

Characteristics of secondary data?

Answer 10

• previously published information
• inexpensive
• may not be relevant

Question 11

examples of secondary data ?

Answer 11

Reports, studies and statistics from governments, private/semi-private sources, business incubators, academic institutions

Informally through social networking sites (e.g., LinkedIn)

Question 12

Characteristics of primary data ?

Answer 12

• collected by the owner
• expensive
• relevant and current
• used when secondary data is unavailable

Question 13

Example of primary data

Answer 13

surveys
observations
test marketing

Question 14

3 steps to estimate the financial feasibility of a proposed business opportunity

Answer 14

1. determine the market potential (revenue)
2. estimate the market share
3. determine the net income (deduct expenses from revenue)

Question 15

How to calculate market potential?

Answer 15

• determine the market area and its population
• obtain revenue statistics for the market area for a product or service
• adjust the market potential as necessary

Question 16

How to calculate the retail of market share?

Answer 16

• estimate the amount of selling space for a product in a market
• estimate size of proposed store
• calculate market share based on selling space
• make adjustments to reflect competitors strengths and weaknesses based on market share
• adjusted market share percentage by market potential

Question 17

Calculate market share. Manufacturing

Answer 17

-estimate total productive capacity in the market
- estimate productive capacity of the manufacturing plant
- calculate market share based on productive capacity
- make adjustments to reflect competitors strengths and weaknesses with regards to the proposed plant
- adjusted market share percentage by market potential

Question 18

Calculate market share. service

Answer 18

• estimate total capacity of the service on the market
• estimate the service capacity of the proposed business
• calculate market share based on service capacity
• make adjustments to reflect competitors strengths and weaknesses based on service capacity
• adjusted market share percentage by market potential

Question 19

How to calculate net income and cash flow?

Answer 19

• using the market share revenue figure, calculate the expenses the business will incur
• subtract the expenses from revenue to get the net income